Canadian E&P: Equity Research

EQUITY RESEARCH | DAILY EDGE
Wednesday, October 13, 2021, Pre-market
Canadian E&P ANALYST TEAM

Cameron Bean | Analyst
Link to ScotiaView
403-218-6786
Where the Gas Flows: Gearing Up for Hot Gas Winter Scotia Capital Inc. - Canada
Jessica Fu, CA, CFA | Senior Associate
403-213-7349
OUR TAKE: Positive. Natural gas prices have continued their volatile trek upward, Scotia Capital Inc. - Canada
with winter Henry Hub pricing sitting well above US$5.00/mmBtu and global prices
holding in near US$30/mmBtu (see Exhibit 1). While the futures curves are in steep
backwardation, we see the marked improvement in longer-term prices (the 10-year
Henry Hub strip is >US$3.35/mmBtu – up ~31% YTD) as a key reason to be positive
about the outlook for natural gas weighted producers. Our Canadian Montney and
natural gas coverage group has outpaced the commodity since the beginning of 2021,
gaining an average of ~240% YTD (versus the XEG at ~71%). However, most of the
group has lagged the commodity so far during 2H/21 (see Exhibit 2). We believe there
are three key factors that suggest further upside potential for our preferred names as we
move toward winter:
This report is intended for [email protected]. Unauthorized distribution of this report is prohibited.
(1) The North American natural gas rig count has not shown a strong response to the
natural gas price rally and remains >10% below the 2018 / 2019 level (see Exhibit 3).
(2) The fundamentals continue to point to several of the Canadian Montney and natural
gas names as the most attractive opportunities in the sector; and
(3) The equities with the strongest fundamental metrics and most favorable price hub
exposure have not been the top outperformers during the natural gas price rally.
Fundamentals remain strong. On current strip pricing our Canadian Montney and
natural gas coverage group has (1) the lowest average 2022E EV/DACF valuation
at ~2.6x (~0.9x below the Canadian large cap oil group and ~0.8x below the US gas
producer group), (2) the second-lowest average 2022E D/CF ratio at ~0.1x (trailing only
the royalty company group), and (3) second-highest average 2022E FCF to firm (FCFf)
yield at ~23% (just behind the Canadian SMid-cap oil group) within the Scotiabank GBM
coverage universe. Notably on 2022 strip prices, AAV, BIR, POU, SDE, and TOU trade
at free cash flow to firm (FCFf) yields of 25% or more and less than 3x DACF, with D/CF
ratios below 0.5x (before buybacks and special dividends).
Analyzing price hub exposure. We have updated our sales hub exposure analysis
(see Exhibits 1 and 6 to 10). Based on our analysis and current market pricing, our
takeaways include:
• Diversification is back in the money. The recent widening of the AECO differential
has moved many sales hub diversification strategies back into the money. Given
current strip prices for the upcoming winter (i.e., Q4/21 and Q1/22), we see
particularly strong netbacks for sales in the US Midwest and US Pacific coast
regions. Within our coverage group, ARX, AAV, and NVA have the highest relative
exposure to the US Midwest region.
• California dreaming. The US Pacific Coast continues to be the highest-value sales

region in North America through YE23 (see Exhibit 1). With both California and
Rockies region production and storage levels down materially y/y (see Exhibits 4
and 5), we expect the robust Pacific region pricing to persist. Within our coverage
group, TOU, ARX, and NVA have the highest relative exposure to the region.
Dissemination: October 13, 2021, 06:35 ET. Production: October 12, 2021, 22:21 ET.
For Reg AC Certification and important disclosures see Appendix A of this report. Analysts employed by non-U.S. affiliates are not 1
registered/qualified as research analysts with FINRA in the U.S. unless otherwise noted within this report.
Notably, we view TOU's Pacific Coast exposure (>15% of production) as especially

attractive.
• AECO prices remain strong. Despite wider near-term basis differentials, the 2022
AECO futures strip continues to call for the highest full-year pricing since 2014.
Moreover, with the Environment and Climate Change Canada probabilistic forecast
calling for below-normal winter temperatures for BC and much of Alberta and
Western Canadian storage levels well below the five-year average, we see potential
for Western Canadian pricing to outpace the strip. Within our coverage group, TOU,
CR, AAV, and KEL have the highest relative exposure to the region.
• What about hedging? Within our coverage group, PEY, CR, and ARX have the
highest proportion of gas hedged (swaps, collars, and other fixed price deals), while
BIR, POU, and AAV have the lowest proportion of gas hedged. Notably, BIR is the
lone name in our group with no fixed price deals in place for the upcoming winter.
The Equity Angle
• We believe that TOU and ARX offer the best diversification mixes. TOU's portfolio is
weighted to an improved Western Canadian market and the premium Pacific coast
market, with JKM linked pricing entering the mix in 2023. ARX has the most balance
across its portfolio, with meaningful exposure at several key sales hubs.
• BIR offers the most torque to natural gas price changes with no fixed price exposure
and a sales portfolio heavily weighted toward Dawn and Henry Hub linked pricing.
• Conversely, PEY has the highest proportion of hedged production through 2023.
While this reduces the company's cash flow sensitivity to natural gas price changes,
it provides stability that we expect to help the company as it reduces its leverage and
increases its shareholder return profile.
• AAV's marketing portfolio is weighted toward Central and Western Canada, with
moderate exposure to the US Midwest and Henry Hub.
• CR has a high proportion of hedging in place for the upcoming winter. The
company's sales exposure shifts to the AECO market for the balance of 2022 and
2023.
• Among the oil-levered equities, KEL, POU, and SDE sell the majority of their natural
gas into the AECO market, while NVA has a relatively balanced marketing portfolio
that provides exposure to several different hubs.
TOU, PEY, and BIR (all Sector Outperform) continue to be our best ideas among the
natural gas-weighted names, while ARX, KEL, and SDE (all Sector Outperform) are our
preferred balanced / oil-weighted names.
See pages 3 to 7 for exhibits.
2
Exhibit 1: Stylized Natural Gas Pipe and Sales Hub Map and October 11, 2021, Futures Strip Prices
WCSB
Producing
Region
Station 2 Mainline
ATP
Westcoast
Empress
Mainline
AECO
Emerson
Sumas Kingsgate
GLGT
Michcon
Stanfield Dawn
PRB Appalachian
Chicago
Ventura Basin
Malin Opal Green Cheyenne
River
DJB Dominion
Uinta /
South
PG&E City Gate Piceance/
Paradox
JKM
LNG PG&E /
SoCal
SoCal City Gate
Waha
Henry
Hub
Houston
Ship
Chanel
Q4/21 Futures Q1/22 Futures 2022 Futures 2023 Futures

C$ Netback C$ Netback C$ Netback C$ Netback
Market US$/mmBtu C$/mmBtu to AECO US$/mmBtu C$/mmBtu to AECO US$/mmBtu C$/mmBtu to AECO US$/mmBtu C$/mmBtu to AECO
Henry Hub $5.61 $7.01 – $5.49 $6.85 – $4.34 $5.42 – $3.50 $4.39 –
Western Canada
AECO / NIT $4.15 $5.18 – $4.16 $5.20 – $3.29 $4.11 – $2.75 $3.45 –
AECO Basis -$1.46 -$1.82 – -$1.31 -$1.63 – -$1.04 -$1.30 – -$0.75 -$0.95 –
Central Canada
Dawn $5.37 $6.71 $0.495 $5.57 $6.96 $0.722 $4.24 $5.30 $0.156 $3.40 $4.27 -$0.224
Pacific Coast
Sumas $6.77 $8.45 – $6.38 $7.97 – $4.49 $5.61 – $3.52 $4.42 –
Malin $6.03 $7.53 $1.562 $6.05 $7.55 $1.566 $4.45 $5.56 $0.663 $3.51 $4.41 $0.164
PG&E City Gate $7.11 $8.87 $2.077 $6.63 $8.27 $1.460 $5.50 $6.88 $1.152 $4.64 $5.83 $0.754
SoCal City Gate $8.04 $10.04 $2.794 $7.62 $9.51 $2.249 $6.12 $7.64 $1.470 $5.19 $6.52 $0.990
US Midwest
Ventura $5.67 $7.08 $1.054 $6.54 $8.16 $2.123 $4.52 $5.65 $0.704 $3.64 $4.57 $0.278
Chicago $5.53 $6.91 $0.826 $5.95 $7.43 $1.329 $4.36 $5.45 $0.442 $3.50 $4.40 $0.046
MichCon $5.27 $6.58 $0.034 $5.27 $6.58 $0.019 $4.11 $5.14 -$0.332 $3.31 $4.16 -$0.661
Global
Japan / Korea Marker $28.02 $34.98 $22.06 $30.56 $38.16 $25.22 $18.52 $23.14 $11.29 $11.60 $14.56 $3.33
Currency US$ Local US$ Local US$ Local US$ Local
CAD/USD FX $0.80 $1.2487 $0.80 $1.2485 $0.80 $1.2499 $0.80 $1.2553
Source: FactSet; Bloomberg; TC Energy Corporation; company reports; Scotiabank GBM.
3
Exhibit 2: Our Montney and Natural Gas Coverage Group Has Outpaced both Henry Hub Prices and the XEG Since January 1,
2021, but Several Names Have Lagged the Commodity since July 1, 2021
Price Change Since January 1, 2021

500%
400%
300%
200%
100%
0%
12-month 24-month XEG NVA CR POU BIR AAV PEY KEL TOU ARX SDE
HH Strip HH Strip
Price Change Since July 1, 2021

60%
50%
40%
30%
20%
10%
0%
-10%
12-month 24-month XEG CR NVA KEL BIR AAV TOU POU PEY ARX SDE
HH Strip HH Strip
Source: FactSet; Scotiabank GBM.
Exhibit 3: Despite the Natural Gas Price Rally, the North America Gas Rig Count Remains >10% Below the 2018 / 2019 Level
Y/Y Change for Trailing 30-day Average (%) Y/Y Change for Trailing 30-day Average (%)
300% 300%
250% 250%
200% 200%
150% 150%
100% 100%
50% 50%
0% 0%
-50% -50%
2021 vs. 2020 2021 vs. 2019 2021 vs. 2018 2021 vs. 2020 2021 vs. 2019 2021 vs. 2018
HH Spot Price HH 24-Month Strip AECO Spot Price AECO 24-Month Strip
US Gas Rig Count US Production Cdn Gas Rig Count AB+BC Production
Source: FactSet; Bloomberg; company reports; Scotiabank GBM.
4
Exhibit 4: YTD California Gas Production Is Down ~5% y/y, While Production from the Rockies States (CO, UT, WY) Is Down ~13%
Seasonal California Gas Supply (Bcf/d) Seasonal Rockies States Gas Supply (Bcf/d)
0.7 11
10
0.6
9
0.5
8
0.4
7
0.3 6
Five-Year Range 2020 2021 Five-Year Range 2020 2021

Source: Bloomberg, Scotiabank GBM.
Exhibit 5: California Gas Storage Is Down ~22% y/y and Mountain Region Storage Is Down ~13% y/y
US Pacific Region Gas Storage Inventory (Bcf) US Mountain Region Gas Storage Inventory (Bcf)
350 350
300 300
250 250
200 200
150 PG&E 51 Bcf 150
100 inventory 100
50 writedown 50
0 0
Five-Year Range Five-Year Average Five-Year Range Five-Year Average

2020 2021 2020 2021
Source: Bloomberg, Scotiabank GBM.
Exhibit 6: Proportion of Natural Gas Production Hedged (Swaps, Collars, and Other Fixed Price Contracts)
Q4/21E Q1/22E 2022E 2023E
BIR BIR BIR AAV

KEL POU POU BIR
AAV AAV AAV CR
TOU KEL KEL KEL
NVA TOU NVA NVA
SDE NVA TOU POU
ARX ARX SDE TOU
POU SDE ARX SDE
CR CR CR ARX
PEY PEY PEY PEY
0% 20% 40% 60% 80% 0% 20% 40% 60% 80% 0% 20% 40% 60% 0% 10% 20%
Source: Company reports; Scotiabank GBM estimates.
5
Exhibit 7: Q4/21E Regional Hub Exposure (Ordered by Corporate Natural Gas Revenue Percentage on Strip Pricing)
Q4/21E Natural Gas Sales Hub Exposure (%) Revenue from Natural Gas (%)
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
AAV PEY BIR TOU CR ARX KEL NVA SDE POU
Fixed / Other US Gulf Coast US Midwest Pacific Coast Central Canada Western Canada % of Revenue
Notes:
Hedged includes: Swaps, Collars, and Options
Western Canada includes: AECO, ATP, and Station 2
Eastern Canada includes: Empress, Emerson, and Dawn
Pacific Coast includes: Malin, PG&E, and Sumas
US Midwest includes: Chicago, MichCon, and Ventura
US Gulf Coast includes: Henry Hub (Physical and Financial)
Fixed / Other includes: Direct Sales Contracts, Swap, Collars, and Other
Source: Company reports; FactSet; Bloomberg; Scotiabank GBM estimates.
Exhibit 8: Q1/22E Regional Hub Exposure (Ordered by Corporate Natural Gas Revenue Percentage on Strip Pricing)
Q1/22E Natural Gas Sales Hub Exposure (%) Revenue from Natural Gas (%)
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
AAV PEY TOU BIR CR ARX KEL NVA SDE POU
Notes:
6
Exhibit 9: 2022E Regional Hub Exposure (Ordered by Corporate Natural Gas Revenue Percentage on Strip Pricing)
2022E Natural Gas Sales Hub Exposure (%) Revenue from Natural Gas (%)
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
AAV PEY TOU BIR CR ARX NVA KEL SDE POU
Notes:
Exhibit 10: 2023E Regional Hub Exposure (Ordered by Corporate Natural Gas Revenue Percentage on Strip Pricing)
2023E Natural Gas Sales Hub Exposure (%) Revenue from Natural Gas (%)
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
AAV PEY BIR TOU CR ARX NVA KEL SDE POU
Notes:
7
Pertinent Data
Advantage Energy Ltd. (AAV-T)
Valuation: 30/20/50 weighting of: 5.0x our blended '21E/'22E DACF, 8% blended '21E/'22E
FCFf yield, and our Scenario Sum of the Assets NAV.
Key Risks: Oil and natural gas prices; drilling program success.
ARC Resources Ltd. (ARX-T)

Key Risks: Crude oil and natural gas prices; CAD/USD exchange rate; drilling program
success
Birchcliff Energy Ltd. (BIR-T)

Kelt Exploration Ltd. (KEL-T)

Paramount Resources Ltd. (POU-T)

Peyto Exploration & Development Corp. (PEY-T)

Key Risks: Crude oil and natural gas prices; CAD/USD exchange rate; drilling program
success
Spartan Delta Corp. (SDE-T)

Key Risks: Drilling and completion risk, commodity price risk, acquisition risk, market
liquidity risk, ARO risk, and regulatory risk.
Tourmaline Oil Corp. (TOU-T)

Key Risks: Oil and natural gas prices; Drilling program success; Gas processing facility
constraints.
8
Appendix A: Important Disclosures
Company Disclosures (see legend below)*

Advantage Energy Ltd. J, V0177
ARC Resources Ltd. G, HH, I, O1, O3, U
Kelt Exploration Ltd. HH
NuVista Energy Ltd. G, I, J, U
Spartan Delta Corp. G, I, U
Tourmaline Oil Corp. G, I, J, O3, U, V0173
I, Cameron Bean, certify that (1) the views expressed in this report in connection with securities or issuers that I analyze accurately
reflect my personal views and (2) no part of my compensation was, is, or will be directly or indirectly, related to the specific
recommendations or views expressed by me in this report.
This document has been prepared by Research Analysts employed by The Bank of Nova Scotia and/or its affiliates. The Bank of Nova
Scotia, its subsidiaries, branches and affiliates are referred to herein as "Scotiabank." "Scotiabank" together with "Global Banking and
Markets" is the marketing name of the global corporate and investment banking and capital markets business of The Bank of Nova
Scotia and its affiliates. Scotiabank, Global Banking and Markets produces research reports under a single marketing identity referred
to as "globally branded research" under U.S. rules. This research is produced on a single global research platform with one set of rules
which meet the most stringent standards set by regulators in the various jurisdictions in which the research reports are produced. In
addition, the Research Analysts who produce the research reports, regardless of location, are subject to one set of policies designed to
meet the most stringent rules established by regulators in the various jurisdictions where the research reports are produced.
Scotiabank relies on information barriers to control the flow of non-public or proprietary information contained in one or more areas
within Scotiabank into other areas, units, groups or affiliates of Scotiabank. In addition, Scotiabank has implemented procedures to
prevent research independence being compromised by any interactions they may have with other business areas of The Bank of Nova
Scotia. The compensation of the Research Analyst who prepared this document is determined exclusively by Scotiabank Research
Management and senior management (not including investment or corporate banking).
Research Analyst compensation is not based on investment or corporate banking revenues; however, compensation may relate to
the revenues of Scotiabank as a whole, of which investment banking, corporate banking, sales and trading are a part. Scotiabank
Research will initiate, update and cease coverage solely at the discretion of Scotiabank Research Management. Scotiabank Research
has independent supervisory oversight and does not report to the corporate or investment banking functions of Scotiabank.
For Scotiabank, Global Banking and Markets Research Analyst Standards and Disclosure Policies, please visit
www.gbm.scotiabank.com/disclosures.
For additional questions, please contact Scotiabank, Global Banking and Markets Research, 4 King St W, 12th Flr, Toronto, Ontario,
M5H 1A1.
Time of dissemination: October 13, 2021, 06:35 ET. Time of production: October 12, 2021, 22:21 ET. Note: Time of dissemination
is defined as the time at which the document was disseminated to clients. Time of production is defined as the time at which the
Supervisory Analyst approved the document.
*Legend
G Scotia Capital (USA) Inc. or its affiliates has managed or co-managed a public offering in the past 12 months.
HH The Head of Equity Research or a Supervisory Analyst owns securities of this issuer in his or her own account or in a related
account.
I Scotia Capital (USA) Inc. or its affiliates has received compensation for investment banking services in the past 12 months.
J Scotia Capital (USA) Inc. or its affiliates expects to receive or intends to seek compensation for investment banking services in
the next 3 months.
O1 Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and
outstanding equity securities of this issuer.
O3 The Bank of Nova Scotia and its affiliates collectively have a net long position in excess of 0.5% of the total issued share
capital of the issuer.
U Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to
equity or debt securities of, or have provided advice for a fee with respect to, this issuer.
V0173 Scotia Capital Inc. is acting as financial advisor to Tourmaline Oil Corp. in the announced agreement to acquire privately
owned Black Swan Energy Ltd.
9
V0177 Scotia Capital Inc. is acting as agent to Entropy Inc., a subsidiary of Advantage Energy Ltd., for financing in relation to the
announced initiation of a formal process to explore alternatives for raising external capital, including a private placement of
equity securities for Entropy Inc.
10
Rating and Price Target History
Advantage Energy Ltd. (AAV-T) as of October 12, 2021 (in CAD)

09-27-2018 06-27-2019 10-08-2019 04-07-2020 04-13-2020 01-14-2021 04-15-2021 07-15-2021 08-09-2021
Price: 3.57 Price: 1.60 Price: 1.89 Price: 1.58 Price: 1.85 Price: 2.22 Price: 3.42 Price: 4.56 Price: 4.33
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 6.50 Target: 5.50 Target: 6.00 Target: 3.75 Target: 4.00 Target: 4.50 Target: 5.50 Target: 7.50 Target: 7.25
12
10
Price (CAD)
6
0
Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22
*Represents the value(s) that changed.

Ratings Legend: FS=Focus Stock; SO=Sector Outperform; SP=Sector Perform; SU=Sector Underperform; T=Tender; UR=Under Review; CS=Coverage Suspended;
DC=Discontinued Coverage
Source: Scotiabank GBM estimates; FactSet.
ARC Resources Ltd. (ARX-T) as of October 12, 2021 (in CAD)

04-09-2018 12-20-2018 06-21-2019 06-27-2019 10-08-2019 02-21-2020 03-09-2020 03-16-2020 04-07-2020 06-15-2020 07-13-2020
Price: 13.97 Price: 8.23 Price: 6.75 Price: 6.47 Price: 5.44 Price: 6.82 Price: 4.36 Price: 2.91 Price: 4.72 Price: 5.10 Price: 4.76
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: UR Rating: SO Rating: SO Rating: SO Rating: SP Rating: SP
Target: 20.00 Target: 16.00 Target: 13.75 Target: 13.00 Target: 12.00 Target: NA Target: 12.00 Target: 7.50 Target: 8.00 Target: 7.00 Target: 7.75
25
20
Price (CAD)
15
10
0
07-31-2020 10-13-2020 01-14-2021 02-11-2021 04-15-2021 05-27-2021 07-15-2021
Price: 5.69 Price: 6.28 Price: 7.27 Price: 7.78 Price: 7.80 Price: 9.17 Price: 9.82
Rating: SP Rating: SP Rating: SP Rating: SO Rating: SO Rating: SO Rating: SO
Target: 8.00 Target: 8.50 Target: 9.00 Target: 11.00 Target: 14.00 Target: 15.00 Target: 19.00

11
Birchcliff Energy Ltd. (BIR-T) as of October 12, 2021 (in CAD)

07-09-2018 12-20-2018 06-27-2019 10-08-2019 04-07-2020 07-13-2020 10-13-2020 11-12-2020 01-14-2021 04-15-2021 07-15-2021
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 10.00 Target: 7.00 Target: 5.50 Target: 6.00 Target: 3.25 Target: 3.50 Target: 4.00 Target: 4.25 Target: 4.50 Target: 5.00 Target: 8.00
12
10
Price (CAD)
6
0

Kelt Exploration Ltd. (KEL-T) as of October 12, 2021 (in CAD)

07-09-2018 12-20-2018 06-27-2019 10-08-2019 04-07-2020 05-19-2020 06-15-2020 07-13-2020 10-13-2020 01-14-2021 04-15-2021 05-31-2021
Price: 8.85 Price: 4.39 Price: 3.97 Price: 2.96 Price: 1.25 Price: 1.31 Price: 1.60 Price: 1.65 Price: 1.44 Price: 2.16 Price: 2.60 Price: 3.25
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 14.00 Target: 9.00 Target: 7.00 Target: 8.00 Target: 2.50 Target: 2.25 Target: 2.50 Target: 3.00 Target: 2.75 Target: 3.00 Target: 4.00 Target: 4.25
12
10
Price (CAD)
6
0
07-15-2021
Price: 3.15
Rating: SO
Target: 5.75

12
Paramount Resources Ltd. (POU-T) as of October 12, 2021 (in CAD)

09-27-2018 11-09-2018 12-20-2018 03-08-2019 03-21-2019 06-27-2019 11-08-2019 01-14-2020 03-05-2020 04-07-2020 08-17-2020 11-17-2020
Rating: SP Rating: SP Rating: SP Rating: SU Rating: SU Rating: SU Rating: SU Rating: SU Rating: SU Rating: SU Rating: SU Rating: SU
30
25
20
Price (CAD)
15
10
0
01-14-2021 04-15-2021 06-18-2021 07-15-2021
Price: 6.09 Price: 9.90 Price: 14.24 Price: 16.38
Rating: SU Rating: SU Rating: SP Rating: SP
Target: 4.50 Target: 10.00 Target: 15.00 Target: 19.00

Peyto Exploration & Development Corp. (PEY-T) as of October 12, 2021 (in CAD)
09-27-2018 12-20-2018 01-17-2019 06-27-2019 10-08-2019 01-14-2020 04-07-2020 05-13-2020 06-15-2020 11-12-2020 12-04-2020 01-14-2021
Rating: SP Rating: SP Rating: SP Rating: SP Rating: SP Rating: SP Rating: SP Rating: SO Rating: SP Rating: SP Rating: SP Rating: SP
40
35
30
Price (CAD)
25
20
15
10
5
0
03-04-2021 04-15-2021 06-14-2021 07-15-2021 09-15-2021

Price: 5.88 Price: 5.18 Price: 7.08 Price: 7.15 Price: 8.89
Rating: SP Rating: SP Rating: SO Rating: SO Rating: SO
Target: 6.50 Target: 8.00 Target: 10.00 Target: 12.00 Target: 13.00

13
Spartan Delta Corp. (SDE-T) as of October 12, 2021 (in CAD)

10-19-2020 01-14-2021 04-15-2021 05-31-2021 07-15-2021 07-29-2021
Price: 2.55 Price: 3.95 Price: 4.05 Price: 4.91 Price: 5.27 Price: 4.89
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 5.00 Target: 7.00 Target: 7.50 Target: 8.00 Target: 10.00 Target: 10.50
25
20
Price (CAD)
15
10
0

Tourmaline Oil Corp. (TOU-T) as of October 12, 2021 (in CAD)

07-09-2018 12-20-2018 06-27-2019 01-14-2020 04-07-2020 06-15-2020 07-13-2020 10-20-2020 11-05-2020 01-14-2021 03-11-2021
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 30.00 Target: 27.00 Target: 23.00 Target: 21.00 Target: 16.00 Target: 23.00 Target: 24.00 Target: 30.00 Target: 32.00 Target: 35.00 Target: 38.00
50
40
Price (CAD)
30
20
10
0
04-15-2021 05-06-2021 05-19-2021 05-31-2021 06-14-2021 07-15-2021 07-16-2021
Price: 24.04 Price: 28.64 Price: 29.39 Price: 29.45 Price: 32.63 Price: 33.96 Price: 33.57
Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO Rating: SO
Target: 40.00 Target: 41.00 Target: 42.00 Target: 43.00 Target: 47.00 Target: 57.00 Target: 59.00

14
Definition of Scotiabank, Global Banking and Markets Equity Research Ratings

Scotiabank has a three-tiered rating system, with ratings of Sector Outperform, Sector Perform, and Sector Underperform. Each
Research Analyst assigns a rating that is relative to his or her coverage universe or an index identified by the Research Analyst that
includes, but is not limited to, stocks covered by the Research Analyst.
The rating assigned to each security covered in this report is based on the Scotiabank, Global Banking and Markets Research Analyst’s
12-month view on the security. Research Analysts may sometimes express in research reports shorter-term views on these securities
that may impact the price of the equity security in a manner directly counter to the Research Analyst’s 12-month view. These shorter-
term views are based upon catalysts or events that may have a shorter-term impact on the market price of the equity securities
discussed in research reports, including but not limited to the inherent volatility of the marketplace. Any such shorter-term views
expressed in research report are distinct from and do not affect the Research Analyst’s 12-month view and are clearly noted as such.
Ratings
Sector Outperform (SO) Other Ratings

The stock is expected to outperform the average 12-month total
Under Review – The rating has been temporarily
return of the analyst’s coverage universe or an index identified
placed under review, until sufficient information has
by the analyst that includes, but is not limited to, stocks covered
been received and assessed by the analyst.
by the analyst.
Tender – As of January 25, 2021, Scotiabank GBM
Sector Perform (SP)
discontinued the Tender rating.
The stock is expected to perform approximately in line with
the average 12-month total return of the analyst’s coverage Risk Ranking
universe or an index identified by the analyst that includes, but The Speculative risk ranking reflects exceptionally
is not limited to, stocks covered by the analyst. high financial and/or operational risk, exceptionally
low predictability of financial results, and
Sector Underperform (SU)
exceptionally high stock volatility. The Director
The stock is expected to underperform the average 12-month
of Research and the Supervisory Analyst jointly
total return of the analyst’s coverage universe or an index
make the final determination of the Speculative risk
identified by the analyst that includes, but is not limited to,
ranking.
stocks covered by the analyst.
Focus Stock (FS)
As of April 29, 2019, Scotiabank GBM discontinued the Focus
Stock rating. A stock assigned this rating represented an
analyst’s best idea(s); stocks in this category were expected
to significantly outperform the average 12-month total return
of the analyst’s coverage universe or an index identified by the
analyst that included, but was not limited to, stocks covered by
the analyst.
Scotiabank, Global Banking and Markets Equity Research Ratings Distribution*
Distribution by Ratings and Equity and Equity-Related Financings*
60%
51.5%
Percentage of companies covered by
Scotiabank, Global Banking and Markets Equity
43.3%
Research within each rating category.
40%
Percentage of companies within each rating
category for which Scotiabank, Global Banking
20% and Markets has undertaken an underwriting
liability or has provided advice for a fee within
5.3% the last 12 months.
33.6% 21.0% 6.9%
0%
Sector Outperform Sector Perform Sector
Underperform
* As of September 30, 2021. Source: Scotiabank GBM.
For the purposes of the ratings distribution disclosure FINRA requires members who use a ratings system with terms different
than “buy,” “hold/neutral” and “sell,” to equate their own ratings into these categories. Our Sector Outperform, Sector Perform,
and Sector Underperform ratings are based on the criteria above, but for this purpose could be equated to buy, neutral and
sell ratings, respectively.
15
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17
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EQUITY RESEARCH | DAILY EDGE

Wednesday, October 13, 2021, Pre-market

Canadian E&P ANALYST TEAM

• California dreaming. The US Pacific Coast continues to be the highest-value sales

Notably, we view TOU's Pacific Coast exposure (>15% of production) as especially

The Equity Angle

See pages 3 to 7 for exhibits.

SoCal City Gate

Q4/21 Futures Q1/22 Futures 2022 Futures 2023 Futures

Source: FactSet; Bloomberg; TC Energy Corporation; company reports; Scotiabank GBM.

Price Change Since January 1, 2021

Price Change Since July 1, 2021

Source: FactSet; Scotiabank GBM.

Source: FactSet; Bloomberg; company reports; Scotiabank GBM.

Five-Year Range 2020 2021 Five-Year Range 2020 2021

Source: Bloomberg, Scotiabank GBM.

Five-Year Range Five-Year Average Five-Year Range Five-Year Average

Q4/21E Q1/22E 2022E 2023E

BIR BIR BIR AAV

Source: Company reports; Scotiabank GBM estimates.

Source: Company reports; FactSet; Bloomberg; Scotiabank GBM estimates.

Source: Company reports; FactSet; Bloomberg; Scotiabank GBM estimates.

Source: Company reports; FactSet; Bloomberg; Scotiabank GBM estimates.

Source: Company reports; FactSet; Bloomberg; Scotiabank GBM estimates.

ARC Resources Ltd. (ARX-T)

Birchcliff Energy Ltd. (BIR-T)

Kelt Exploration Ltd. (KEL-T)

Paramount Resources Ltd. (POU-T)

Peyto Exploration & Development Corp. (PEY-T)

Spartan Delta Corp. (SDE-T)

Tourmaline Oil Corp. (TOU-T)

Appendix A: Important Disclosures

Company Disclosures (see legend below)*

Rating and Price Target History

Advantage Energy Ltd. (AAV-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

ARC Resources Ltd. (ARX-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

Birchcliff Energy Ltd. (BIR-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

Kelt Exploration Ltd. (KEL-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

Paramount Resources Ltd. (POU-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

03-04-2021 04-15-2021 06-14-2021 07-15-2021 09-15-2021

*Represents the value(s) that changed.

Spartan Delta Corp. (SDE-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

Tourmaline Oil Corp. (TOU-T) as of October 12, 2021 (in CAD)

*Represents the value(s) that changed.

Definition of Scotiabank, Global Banking and Markets Equity Research Ratings

Sector Outperform (SO) Other Ratings

* As of September 30, 2021. Source: Scotiabank GBM.

© The Bank of Nova Scotia 2021

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